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For-Profit Education Stocks: Which Will Outperform in 2011?

Strayer executives said negative publicity and uncertainty regarding proposed regulations surrounding the for-profit education sector in recent months led to the student enrollment decline.

The company's statement echoed cautionary statements on student enrollment from school stock peers such as Corinthian Colleges , Capella Education (CPLA - Get Report) and ITT Educational Services (ESI).


Education-providing institutions will also be required to limit student enrollment to those who have high school diplomas or can readily demonstrate their readiness for university-level education. Schools must also comply with what is called the 90:10 rule in fiscal 2012. The rule stipulates that no more than 90% of a for-profit education provider's revenue may be generated from Department of Education's federal student aid program.

Federal aid to for-profit education providers came to nearly $150 billion in the last academic year.

The highly controversial "gainful employment" rule, would sharply limit for-profit schools' access to federal aid and could be finalized as early as this month.

"The educational services sector lacks a hard catalyst other than the Department of Education's widely anticipated publication in [2011's first quarter] of the final version of gainful employment," noted RBC Capital Markets analyst Robert. C. Wetenhall.
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